Top 4 important things you need to know for investing

Below are the some of the most important things that you need to know relating to bonds and debt security.

14:19 03 February 2013

If you’re thinking about investing on bonds, it’s crucial for you to know the following facts: 

 

1.Bonds are very straightforward. Compared to share trading and stock trading, bonds are relatively straightforward.

 

Despite the numerous titles being used to describe them – debt instruments, fixed-income securities, credit securities, etc. – bonds are simply debts bought from an issuer, which could be government or private corporation, which guarantees the capital plus the interest on the pay-back date. 

 

2.Bonds are less risky compared to equities. Bonds have reputation for safety although there is still risk involved. Unlike when investing on stock market, investors who bought debt securities are assured that they’ll get their capital back plus interest on the maturity date. 

 

3.Bonds are graded. It’s easy to tell if a bond is investment grade or junk. There are several credit rating agencies that rank bonds by safety. Through this, you’ll have an idea on the risk that you’re taking and how much you can make from the bonds that you bought. 

 

4.Certain bonds offer tax-free returns. Of course, you would want to lessen the taxes you pay for your earnings. You can make that happen by buying cities and municipal bonds that offer tax-free returns.